PEV - Fixed Overhead Variances

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:08AM in AAT student discussion
Does anyone know an easy way to remember how to calculate the fixed overhead expenditure, volume, capacity and effeciency variances?<BR><BR>Your help would be grately appreciated.<BR><BR>Paul

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    PEV - Fixed Overhead Variances

    Expenditure<BR>Did we pay less/more than budget?<BR>Volume<BR>Did we produce more/less than budget?<BR>Capacity<BR>Were the hours worked more/less than budget?<BR>Efficiency<BR>Were the hours worked more/less than the standard for what we actually made?<BR><BR>If you rely on formulae, the examiner could word the question in a way that your formulae doesn't work. So make sure that you understand the nitty gritty that will cause the variances.<BR><BR>Sandy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    PEV - Fixed Overhead Variances

    Thanks Sandy<BR>Will revise and try and memorise your reply.<BR>Cheers<BR>Paul
  • System
    System Posts: 100,534 🤖 Admin 🤖
    PEV - Fixed Overhead Variances

    <BR>We've been told BASH<BR><BR>B udget hours x standard rate<BR><BR>A ctual hours x standard rate<BR><BR>S tandard hours x S tandard rate<BR><BR>But I can never remember which two are for which variance, so I think Sandy's right - understanding the variance is a giant step towards calculating it!<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    PEV - Fixed Overhead Variances

    <BR>The mnemonic we were given was:<BR><BR>Vera likes Stale Bread<BR>Elephants Stomp Ants<BR>Cows Are Beefy<BR><BR>Volume uses Standard against Budgeted<BR>Efficiency uses Standard against Actual<BR>Capacity uses Actual against Budgeted<BR><BR>Now all you have to remember is which are favourable and which are adverse :-)<BR>

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